Introductory Financial Economics With Spreadsheets Book

As a reference, this book has its good points and bad. It is broad, managing at least to touch on nearly every important theorist of the last 200+ years. But in some cases this completist approach produces a shallowness of treatment (particularly with Pareto, Clark, Edgeworth, Knight, and others from that time) that calls into question the value of the breadth. Another point of weakness is that Skousen either cannot or will not provide the strongest and most plausible exposition of theories to which he's hostile. Skousen's rigidity is such that even Ricardo, author of the Comparative Advantage argument for trade, appears to him to have been insufficiently enamored of free markets. Hence the work is only fully reliable on those theorists who have Skousen's full approval (broadly speaking, the Chicago and Austrian schools).

The preface of the book contains Skousen's touching and humorous account of how he unintentionally killed Murray Rothbard. It goes downhill from there.

Skousen's work continues in the long tradition of unjustly setting up Adam Smith as the first economist, and proceeds to engage in a sustained act of necrophilia with the famous Scotsman, carrying his corpse through the succeeding two-hundred years and comparing it favorably to every subsequent thinker who was less optimistic on free markets, while also claiming that the Austrian and Chicago schools advanced the true Adam Smith tradition. Skouson never settles on a single metaphor to pin this conceit to, and so sometimes he tells us we are hearing the story of "Adam Smith" himself, while at other times economic thought is Adam Smith's "house". This framing device is well beyond asinine, and one wonders how the editors allowed it to remain. Skousen acknowledges early on that the historical Adam Smith was no libertarian, in that he espoused a labor theory of value, opposed monopolies, wrote in favor both of land taxes and of progressive income taxes, and made the case for public schools and public works projects, but somehow this isn't the Smith that Skousen takes with him through the remainder of the text. Smith lived long ago so of course he didn't quite get his theory to be the way Skousen wants it.

The chapter on John Stuart Mill is called "Milling Around." The chapter on Alfred Marshall is called "Marshaling the Troops." These are representative examples of Skousen's quick wit and devilish way with words. Skousen also thinks he can get us to put on a piece of classical music, chosen by him, whilst we read each chapter. Being a libertarian does not preclude being plenty meddlesome.

In the chapter on Max Weber, whom he somewhat implausibly counts among the economists, Skousen asserts the real value of Weber's work to have been that theory must be based on empirical evidence. No theory that shirks this test is worthwhile, Skousen avers. He repeats this a bunch of times since there's not a lot else to say, which is one of the downsides of putting a non-economist in a book on economics. In the chapter on Ludwig von Mises, however, in which Skousen becomes ostentatiously unfaithful to the Smithian corpse, Skousen approvingly repeats Mises's opinion that empirical evidence merely tells us what happened one time in the past, and that the only reliable economic theory is one that builds from first principles and rejects empiricism altogether. Empirical evidence, in short, is for losers (the chapter is devilishly titled "The Missing Mises"). Between Weber's view and Mises' there is a certain tension, but in Skousen's way of seeing things this is apparently no problem. It is really only the ideological end point that matters, and the route to get there is chosen for convenience's sake. Two contradictory stories is not a big deal. Psychologists call this phenomenon "cognitive dissonance." Skousen is no psychologist, so you can't blame him for not recognizing it.

Having been written and released at the high point of the "endless privitization and deregulation of everything!!" tendency that culminated ten years ago in rolling blackouts and the presidency of George Bush, this book has an unreal, triumphalist tone. Skousen assumes that his side has won and will continue winning, so he has the smugness of all who have succumbed to hubris. In attributing this tone to the era, I am perhaps being too generous, as I have checked Skousen's present output and he still sounds this way.

Skousen has striven to provide a work accessible to the public, so he has larded it liberally with gossip. I trust that some of this is true, but Skousen seems excessively credulous -- his depiction of Pigou as a Soviet spy seemed to me at first to have been pulled directly from his nether regions, but when I researched the claim, I found that it stemmed from a single unreliable source in the mid-70s (and so far totally unsupported by information from the Russian vaults). We also get to see Skousen bombastically reporting on tepid episodes, such as Menger's affair... with a woman to whom he was not married! Skousen acts as though such banalities were quite scandalous indeed, much like a bored tween. We also get to see him musing about the causes of Keynes's homosexuality (he thinks it may have resulted from Keynes's estrangement from his father). Ten years ago it was all good fun to ponder this sort of thing, even for a lover of liberty.

The book's treatment of Milton Friedman is of historical interest, given the rift that has since opened between the monetarists and the Austrians. Skousen presents Friedman simply as the knight in shining armor, who burst forth unexpectedly and saved "Adam Smith" (or is it Smith's house?) from the interventionist barbarians of Cambridge, MA and Cambridge, UK. One wonders how much more measured Skousen's assessment might be in future editions, given how much of a flashpoint central bank policy has become between the two schools, now that the business cycle has shown that it still can muster a vicious downside.

Skousen says that Joan Robinson's left-wing comments on current events in the late 60s and early 70s were why the Nobel committee snubbed her (this much is certainly true), and that the comments were an embarrassment to her friends and foes alike. I do not see why her foes should have been at all embarrassed. Shouldn't they have been glad that Robinson was giving them fodder for criticism?

I could really go on and on saying unfavorable things about this book, but I must acknowledge, again, that as a general survey it is not without utility. It cannot be recommended as a final authority, however.